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Tuesday, September 16, 2014

Gold and Silver charts: going down the trail of broken supports

Gold Chart Pattern

GOLD_Sep1514

In a post 4 weeks ago, the bar chart pattern of gold had touched a lower top of 1325 in bull territory. But bears used the opportunity to sell, and gold’s price had slipped down below all three EMAs. Some consolidation was expected before the down move was expected to resume.

What occurred instead was a feeble attempt at a rally towards the end of Aug ‘14 within a small ‘rising wedge’ pattern. The falling 50 day and 20 day EMAs provided stiff resistance. Gold’s price dropped sharply below the ‘wedge’ on Sep 1 on a volume surge, and continued to fall till it dropped below the support level of 1240 (marked by blue horizontal line).

Note that the support level of 1240 acted as a resistance when gold’s price attempted a pullback yesterday (Sep 15). All three daily technical indicators are in their respective oversold zones. Any attempt at a rally will probably face more bear selling. Looks like the long-term support level of 1180 – touched in Jun and Dec ‘13 – will finally get tested, and may be even broken.

On longer term weekly chart (not shown), gold’s price is trading below all three weekly EMAs in a long-term bear market. Technical indicators are in bearish zones – hinting at a continuation of the down move.

Silver Chart Pattern

SILVER_Sep1514

The 6 months daily bar chart pattern of silver has been in a free fall within a downward-sloping channel for the past 2 months - except for a sharp intra-day break out above the channel (and the falling 20 day EMA) on Aug 28.

Silver’s price breached the support level of 18.65 (marked by thick blue horizontal line) last week, and pulled back to close just above the support level yesterday (Sep 15). Even if the pullback continues, silver’s price is likely to remain within the downward channel.

All three daily indicators are inside their respective oversold zones – but in a bear market, indicators can remain in oversold zones for long periods. Note that Slow stochastic has remained oversold for more than a month. Any rallies are likely to attract bear selling.

On longer term weekly chart (not shown), silver’s price is trading below all three weekly EMAs in a long-term bear market. Technical indicators are in bearish zones. The Jun ‘13 low of 18 is under threat of being tested and breached.

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